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Fossil shares fall after Citi downgrade

The Associated Press

Shares of Fossil Inc. fell Wednesday as a Citi analyst downgraded the watch maker's stock after its big rally Tuesday on strong second-quarter results.

THE SPARK: Citi analyst Oliver Chen downgraded Fossil's stock rating to "Neutral" from "Buy," but raised his target price on the company to $100 from $88.

THE BIG PICTURE: Fossil reported Tuesday that its second-quarter net income climbed 12 percent, thanks to strong watch sales and higher demand in Asia. Shares closed up 32 percent to $91.77 Tuesday.

THE ANALYSIS: Chen said Fossil plans to sell cheaper watches to accommodate the weakening economy, which he thinks is a good idea. But he said he thinks the company should build more outlet stores so it can sell the cheaper watches separately from its more expensive watches. He said that he expects Fossil's new high-end watches to sell well.

SHARE ACTION: Down $5.04, or 5.5 percent, to $86.73 in afternoon trading Wednesday. The stock had been up 46 percent since hitting a 52-week low of $62.77 in July.